(NewsNation) — The U.S. Supreme Court will hear oral arguments this week in a case that could put tens of thousands of dollars back in the pockets of Americans who lose their property in tax forfeitures.
At the heart of Tyler v. Hennepin County is whether the government should be able to keep money that’s sometimes left over once property tax debt has been recouped in forfeiture cases.
The case was filed by 94-year-old Minneapolis woman Geraldine Tyler, whose condo was seized after she moved to a senior community and fell behind on her previous homes’ property taxes.
In total, Tyler accrued about $15,000 and tax debts and fees. Hennepin County ultimately seized her condo and sold it for $40,000 and kept all the money.
In Minnesota, once property taxes go delinquent the county seeks a judgment in court and in some cases, the property is sold to the state. That sale begins a redemption period, which usually lasts about three years, according to court filings. In that time, the taxpayer can get their property back if they pay the unpaid taxes and any additional interest or fees.
If that debt remains unpaid, the title is turned over to the state, and the county can then sell it to another owner. None of the money from that sale is given to the former owner.
Tyler says she’s owed whatever money remained from the sale of her home after the county pocketed the equivalent of what she owed in property taxes.
Lawyers for the county, however, say state law allows them to keep the total sum, despite a contradictory Minnesota Supreme Court ruling.
Oral arguments in the case are scheduled to happen Wednesday.
Tyler’s argument
The ACLU, which filed a brief in support of Tyler, said Minnesota lawmakers undercut an 1884 Minnesota Supreme Court ruling that found homeowners have a right to those surplus funds.
Pacific Legal Foundation — the law firm representing Tyler — also says both the U.S. and state constitutions bar the government from levying excessive fines. They argue Hennepin County violated that rule by keeping the additional $25,000 from the condo sale.
“The government should never take more than it is owed when collecting a debt,” one of Tyler’s attorneys Christina Martin said. “More than the taxes, penalties, interest, and costs that are due is unjust legalized theft.”
What the County says
Lawyers representing Hennepin County have said through court filings that Tyler abandoned her condo in 2010 and that the government followed state law when the title was ultimately forfeited.
They also claim Tyler didn’t attempt to buy her condo back during the redemption period.
“After (Tyler) failed to protect her property interest for five years, and ‘absolute title’ forfeited to the state, (Tyler) had no remaining property interest to take,” the county argued in court filings.
The case originally was handled in lower courts, which side with the county.
“When properties are sold, net proceeds offset the loss to school districts, cities, and the county of uncollected property taxes,” Hennepin County Assistant County Administrator Dan Rogan said. “Forfeiture is not a source of profit—factoring in all costs, Hennepin County’s program does not manage to break even.”
The potential impact of a ruling
Tax officials in 12 states and Washington D.C. are allowed to take the revenue generated from the sale, as Hennepin County did.
A win for Tyler would mean the government no longer could collect surplus home equity beyond what they were owed in unpaid property taxes at the time of the forfeiture. That money would instead be paid back to the previous owner.
In terms of this case, Tyler would be reimbursed for the money that was left over.
If the county wins, things will essentially remain the same and governments would be able to continue pocketing the full amount of a tax forfeiture.
